Asia, Europe and Africa face most negative impact of the Red Sea Crisis

The Red Sea crisis is expected to adversely impact trade volumes in a substantial way in 2024, said a report by GTRI, adding that rising shipping, and insurance costs, delayed arrival of shipments will continue to disrupt global value chains, squeeze margins and make exports of many low margin products unviable from current locations. Countries like Asia, Africa and Europe will face the most disruption across industries. Started in a major way on October 19, 2023, the Red Sea crisis is in its fifth month now. 

The Red Sea shipping crisis has disrupted global trade and supply chains, particularly affecting routes through the Suez Canal said GTRI. Expectedly, longer journey delays shipments, thus affecting the trade finally.

The impact of the ongoing crisis impacted Indian trade, especially with the Middle East, Africa, and Europe.  Shipping costs for all container goods, including cars and electronics are also up

 “While India is implementing measures to ensure the safety of its ships in the Red Sea, the effectiveness may be limited as most Indian cargo is carried by global shipping firms,” GTRI said. Further, India can also rely on ports outside conflict zones, like Oman and Djibouti, for transshipment and regional trade.  

 “Firms are adopting strategies like multiple sourcing for less complex components to maintain supply continuity and cost efficiency. For more complex and critical products, companies are exploring strategic sourcing options including onshoring, nearshoring, and friendshoring to reduce geopolitical risks and ensure supply chain resilience,” it said.